Andy Chan's Blog for Parents, Mentors and Teachers

Private equity blues

Over the past five years, Private Equity was the hottest sector of interest for MBAs (and for lots of other white collar professionals who were seeking greener pastures). Almost everyone was interested in it. Even if they didn’t know what one actually did in a PE job.

PE sounded so glamourous and paid much more than most every other job. What a challenging and stimulating job! It was a blend between strategic consulting and investment banking, with seemingly fewer hours (but not really). Plus the salary compensation of a venture capitalist and incomparable equity upside. How could you go wrong?

As the proverb goes, “What goes up must come down”.

We are now hearing from both job seekers and PE firms and the feedback is consistent. PE is now effectively shut down to job seekers. Even those with industry experience (pre- or post-business school) are finding it extremely difficult. In most cases, job seekers are competing against more experienced PE professionals who have been laid off.

If you have no prior PE experience, it will be virtually impossible to enter now. Save your time and energy and move on.

PE firms are very reluctant to hire new staff in this uncertain economy. Their investments are hurting. Credit is unavailable. Investors are skittish and having troubles of their own. Hiring is the last thing on the PE firms’ minds.

If you’ve been searching for a PE job and coming up dry, there are other options that we hear folks are pursuing instead:

1) Work for a portfolio company of a PE firm. Although there’s no guarantee that you’ll someday return to the PE firm as an investor, you will be able to maintain and grow connections with your PE firm network.

2) Take a pre-MBA analyst role in a PE firm. It’s not on the partner track, but you’re in the game. However, don’t assume that your firm will eventually give you an opportunity to get onto the partner track. Be thankful that you have the job, build great relationships and outperform expectations in your job. When the market improves, seek out growth opportunities within your firm or elsewhere.

3) Find a corporate development job, typically at a larger company that is doing mergers and acquisitions. If you like the dealmaking aspect of the PE business, this would be a good fit

4) Get a job where you learn how to run a company. This may involve a more traditional marketing, finance, sales, or operations job where you grow into a vice president or general manager over time. Or perhaps you can start or buy your own company with your own resources or with the support of some investors.

Some people moan “I have to get into PE now or the door is shut forever.”

In response to this frequent question, I have often heard PE partners advise, “Become a rock star at what you do – whether as an investor or operating executive. That’s when a PE firm is most interested in making you a partner as you will have proven your business acumen. You’d likely have a high value network plus a large personal asset base. At the same time, you’d probably be able to start your own private equity firm with people in your own network.”

PE ain’t what it used to be. It looks like it’s time to move on.

What’s your view of the PE opportunity in this market? What alternative jobs and careers are you considering?